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1993 to be a turning point for real estate.

In 1992 New York City witnessed a third straight year of relatively low volume in Manhattan building sales 2.10 percent (or 88 buildings out of 4,187 surveyed). In addition, average prices dropped by another 7.3 percent to a recent low of $278 per square foot on average. Foreclosures continued at a rate of approximately 10 percent of all deed transfers. We now estimate that 20 to 25 percent of all New York troubled mortgages have transferred back to their primary lenders.

1993 is certain to bring an increase in volume as foreclosures continue and those seeking to hold for an immediately improved market sell in frustration. An increase in volume won't necessarily cause a decline in price levels, however, because Manhattan buildings are still a very finite commodity and even if volume increases back to pre-recession levels that would only be 4.0 to 4.5 percent of all properties selling in a given year. Foreclosures will most definitely increase as financial institutions complete the lengthy and complicated process of taking back significantly more of their troubled loan port. folios. 1993 will be a turning point because a majority of foreclosures will most likely be completed by year end. Investors will view the market at "the bottom" for many reasons (both factual and perceived). Increased volume and stabilized prices will provide a positive signal to property owners who will then, with renewed confidence, increase leasing volume both in the residential and commercial sectors. Lastly, financial institutions will, at year end, once again create a debt market for New York property (although with a conservative outlook) as they realize once again that although the New York market can be cyclical, 'the Manhattan market on the whole will always be an exciting, vibrant and dominant metropolitan region.

Price Levels

1992's decline of 7.3 percent to an average per square foot sales price of $278 is a recent low. Since 1986, average prices for New York property have dropped at a steady pace. From a high in 1986 of $480 approximately 40 percent of all market value has eroded. This correction will end in 1993. Investors, including foreign corporations and individuals, will (and do already) view the market at a 10-year low. A favorable exchange rate and a relatively stable political market will contribute toward renewed demand for fine Manhattan buildings.

Foreclosures

Because of the long and legally complex process of foreclosing on New York property many of those buildings that went into default in 1989-1990 are just now having title transferred back to the lender for disposition. Among properties that have been foreclosed many have already been resold to the private sector. Under pressure to improve their balance sheets, financial institutions have been efficiently selling what they have taken title to. As foreclosure occurs on the remainder of defaulted loans we anticipate brisk and continued orderly dispositions.

Volume

All during the 1980's volume of Manhattan sales hovered around the 4 percent level. During the last three years volume has remained steady at 2.0 percent. Both commercial and residential properties have been transferring in equal number. Higher priced and larger properties have not been selling in significant number. Additionally, foreclosures of major properties have been limited as lending institutions fear the management headaches related to larger buildings. In many cases these loans are being restructured allowing management contracts for the original owner and some limited equity participation in the event of future appreciation for the original owner. Sales of more than $10 million this year in gross consideration include:

1. 1 East 42nd Street to British Airways for $20 million

2. 328 East 50th Street to Lloyd Goldman for $17 million

3. 150 West 51st Street to Star Hotels for $33 million

4. 325 East 56th Street to Leonard Litwin for $30.8 million

5.20 East 68th Street to Cooperative for $13 million

6.44 East 71st Street to Government of Korea for $10.8 million

7. 500 Madison Avenue to Omni Hotels for $75 million

8.52 Park Avenue for MIRI Holdings for $12 million

9. 320 Park Avenue to Mutual of America Life for $130 million 10. 436 Fifth Avenue for May Dept. Stores for $14 million

In 1991 there were also 10 sales in the surveyed market area with a purchase price in excess of $10 million. Prior to the recession 30 to 40 buildings on the Eastside and in Midtown would sell in this price range.
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Title Annotation:Review & Forecast, Section III; 1993 expected to bring increase in volume of sales for New York, New York real estate market
Author:Knakal, Robert A.
Publication:Real Estate Weekly
Date:Jan 27, 1993
Words:743
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